Tuesday, August 14, 2012

Is Government Spending "trickle down economics"?

Welcome to Tony Island blog!

In his latest ads and campaign stops, Mr Obama rails against the Republican plan to lower taxes and regulations (essentially "get government out of the way") as "trickle down economics".

"We've tried that before and it didn't work", he rails (and don't you just hate the way he treats us as he would a group of students in one of his lecture halls - the finger pointing, the hand raising gestures, etc? That irks me to no end!)

But then Obama goes on to propose more government spending - money to buy crops and livestock from farmers. Money for "green jobs". Money for college students' debt, et al.

I have to ask though - isn't all this government spending "trickle down economics" by any other name? Why is it when the President proposes spending public money it's "jump starting" the economy yet when the Republicans propose spending private money, it's "trickle down economics"? I don't see the difference myself.

Of course, the larger issue is that all the current government spending hasn't done diddly squat to get the economy moving. If public spending were the panacea to our ills, we'd never have recessions in the first place - I mean, if a 3.5 trillion dollar budget isn't enough to keep the economy going, what is? And that's only at the Federal level - think of the billion dollar budgets each of the 50 states create and the billions of dollars (cumulatively) the municipalities spend every year. Yet, we are still in a deep recession with 8+% unemployment. Why hasn't all that spending worked? Because it's merely shifting money from one group to another group and not creating any lasting value. It's not creating wealth - it's merely swishing it around. And in the long run, that doesn't work.

The Democrats are going to be trotting out some favorite chestnuts this year - since they haven't been able to fix the economy, it's all they have to work with.

One of them is "investing in infrastructure". They want to "fix the roads and bridges". That's all well and good but how many jobs does that really create? If you're a 48 year old unemployed (or under-employed) computer systems analyst, how does fixing roads and bridges help you? How about if you're an unemployed steel worker? Auto worker? White collar office worker? While massive increases in infrastructure spending will jack up employment in the short term, it's only going to bring in extra workers around the periphery that are willing to take on such back breaking work. That is, most unemployed computer programmers aren't going to pick up a shovel or learn to use a tar smoother to get a job. And even if they do, these extra jobs are going to be relatively unskilled until the worker hones his natural ability to work on road and bridge projects. And of course, what happens in the winter when large areas of the country become impossible to work in? We're back to square one.

The reality is that the government needs to step aside and let the private economy find its footing naturally. When things hit bottom, they will begin to slowly but surely move back up. And if the government would stay away from picking winners and losers and not artificially creating bubbles in various sectors of the economy, then things will be better still.

It's time to stop government "trickle down economics" and let market economics work its magic.

What are your thoughts? Share them below!

Thanks for reading Tony Island blog and be sure to come back for more soon!

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